A Checklist for small businesses at the end of the year

There are a variety of reasons why the end of the year is a busy time. Christmas preparations, family time, and planning for the new year keep most of us busy through December. If your business year aligns with the calendar year, you have even more things to consider at the end of the year. Incentives for employees, review of financial statements, and taking stock of progress are all included on this list.

At the end of the year, balancing work and life can be challenging. It will not only help you end this year on a high note, but it will also set you up for success in the new year.

Take care of business tasks before year-end with this checklist. Now that these tasks are off your plate, you can focus on what really matters.

Keeping accounts

Managing your financial records throughout the year is essential, but even more so in December. By maintaining accurate, clean records, you can better predict what the new year holds. In the new year, you'll be better prepared for tax season. Take care of these accounting tasks before December 31.

1. Run standard financial reports

When your business year aligns with the calendar year, the end of the year is a good time to evaluate where you stand financially. A financial report can be generated using your favorite accounting software. Income statements, balance sheets, and cash flow statements typically accompany this report.

When it comes to understanding your profits, your income statement, or profit and loss statement, is crucial. At a glance, this financial report will show you how your business is doing financially and how the new year is shaping up. You may want to consider making some changes as you head into the new year if your profits are lower than expected.

A higher profit than expected may be an indication that the new year is the right time to invest in your business's development.

2. Cash flow analysis

In a cash flow statement, you can see how your money was spent throughout the year.

Business income is represented by cash inflows, while business expenses are represented by cash outflows. The goal is to generate more money than you spend.

In order to identify cash flow trends throughout the year, it's a smart idea to analyze your cash flow statement towards the end of the year.

There are many reasons why cash flow problems occur. A problem can be rectified more quickly if it is identified sooner.

A business's net cash outflows are not necessarily indicative of a cash flow problem.

An excess of outflows over inflows creates a cash flow problem. Calculate cash flow by separating it into three categories:

  • Cash flow from operating activities (revenue and expenses)

  • Cash flow from investing activities (assets purchased and assets sold)

  • Cash flow from financial activities (loans and repayments)

To calculate the ending cash balance, the cash flow formula adds a beginning cash balance with net changes in each activity.

3. Make sure vendor information is accurate

There have been a lot of changes in your business this year, and the same goes for your vendors.

Verify that each vendor's contact information, including phone numbers, email addresses, and names, is still accurate at the end of the year. Make sure all inactive vendors and inaccurate information are removed from the system.

In the new year, evaluate your vendor relationships and look for opportunities to negotiate better deals.

4. Accounts receivable should be reconciled

You receive accounts receivable from your customers after they purchase your goods or services on credit. It's a running list of invoices that are still unpaid and clients that owe money for work already completed.

There's no need to feel alone if your list is longer than you'd like it to be. According to a QuickBooks Cash Flow survey, U.S. business owners had over $78,000 in outstanding receivables in 2019. The biggest cash flow pain point for more than half of these business owners is not getting paid on time.

You can calculate how efficiently your business collects revenue by calculating your accounts receivable turnover ratio. Your customers pay their debts quickly if your ratio is higher. If your collection procedures are lower than average, you may need to make some improvements.

It is a good idea to collect past-due payments before the end of the year, regardless of your ratio. You can start the new year without outstanding invoices when you reconcile your accounts receivable.

5. Make sure payroll and benefits are correct

If any payroll issues or corrections need to be made before year's end, stay on top of them. Ensure that fringe benefits, such as sick pay from third parties or company cars, are accounted for. Educational reimbursement, health insurance, and transportation subsidies are other benefits that are easy to overlook.

To take stock of this, wait until the end of your business year or the fiscal year if your business year doesn't align with the calendar year.

Tasks associated with IT & DATA

It's always a wise idea to make sure your IT ducks are in a row by the end of the year, regardless of how much or how little you work with technology. You need to back up your data, organize your paperwork, and make sure your systems are up to date. As December 31 approaches, here are a few IT-related tasks to consider.

1. Create a computer backup

Keep backups of important data as a best practice.

Ensure that your critical files, including accounting documents, client information, creative briefs, and emails, are backed up and securely stored. Ensure your new employees have access to a cloud-based storage system or external hard drives if they deal with sensitive documents.

2. Backup your contacts

Even if you write down your contacts, back up all of your contacts, whether you do most of your business via phone or email.

Maintain the most current contact information for your most important business contacts just as you did for your vendors.

3. Download important files or reports

Keeping important documents or reports on a cloud-based storage system like Dropbox or Box is a good idea, but making hard copies and backing them up to an external hard drive is equally critical.

When it comes to data backup, the golden rule is 2:1. Make two separate digital copies, store them in two different places, and make one offline copy (preferably somewhere else).

4. Evaluate your file-naming conventions

Take the time to implement a system for naming files across your organization if you don't already have one.

You might adopt a convention like "LastName-Date-InvoiceNumber" if you manually save receipts as Word files.

Businesses that share servers that can be accessed by multiple employees should adopt file-naming conventions across the company. Following the same naming conventions keeps your files organized and accessible. It's still a good idea to keep your files organized as your business grows even if you don't share servers.

Be sure to name and organize your files appropriately when backing up your documents and data. Now is the time to change file names so you don't have to search for something in June.

Human resources (HR)

Having completed the technical and financial tasks, evaluate your team. Your business relies on them. Before the end of the year, take care of a few "people" tasks, no matter how big or small your team is.

1. Think about year-end incentives

End-of-year rewards are a great way to thank your team for their dedicated work. It could be paid time off, flexible schedules, monetary incentives, or even a fantastic Christmas party for the entire company!

The end of the year is a good time to boost morale and increase worker satisfaction.

Don't forget to check and factor in the tax implications of Christmas parties when planning. To qualify for tax exemption, they must meet certain criteria.

2. Take a look at your staffing requirements

Decide whether you need to hire more employees in the new year by taking inventory of your team. Any additional personnel you plan to hire in the first or second quarter should be budgeted.

However, your business needs may have changed throughout the year. To reallocate your team's talents if you are overstaffed, create new roles. It may also be a good idea to reduce hours or reorganize schedules to better suit your business needs.

Additionally, you should review your compensation and benefits plans at the end of the year to ensure they're still competitive.

3. Take time to celebrate your business achievements

Don't forget to reflect on your team's accomplishments as the end of the year approaches. Make sure you document your wins and share them widely. Ending the year on a positive note will motivate your employees to get started in January. You can also recognize outstanding performers and create promotional paths for them at this time.

General business

As a final note, you should take a look at a few business odds and ends before the new year begins. Update your goals, clean up your website, and double-check your inventory. Back-office tasks help your business run smoothly and grow.

1. Set new goals for your business

Using your financial statements, customer feedback, and team input, assess whether your goals from the previous year were met.

Were you successful in achieving your goals? Was your path to success unexpected?

Make goals for the new year based on the learnings from the previous year. Financial goals should be a given, but make room for management goals and client goals as well.

After you've written down a few goals for the new year, create a high-level action plan to help you achieve them.

2. Conduct a website audit

Having a solid website for your business is more important than ever in today's world of e-commerce. Your website is the gateway to your business for many of your customers.

Start by clicking on every single link on your website. Send yourself an email or message from the "contact us" form. Find out if you can follow a customer's journey through the website to make a purchase.

It may seem like mundane tasks, but these systems fail all the time. Websites serve as your digital calling card and the first impression of your business.

Here's a guide to help you optimize your website for Christmas.

Prepare for the future

When you keep a checklist, closing out the year is a manageable task for a small business owner.

If you don’t yet work work an accountant or intend to switch, make an appointment as soon as possible. You will find that the more you plan for these tasks throughout the year, the easier your end of year will be!

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